File photo | The RepublicanMassachusetts Lottery scratch tickets. Despite numerous studies on the issue, no one knows for sure how much in lottery sales will be siphoned by casinos and slot machines, Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, said.

BOSTON – Most cities and towns are unlikely to see any gains in state aid from casinos because the planned gambling resorts are expected to take sales from the state Lottery, according to a leading analyst.

The 40-year-old state Lottery is a major cash source for cities and towns. It is expected to return about $900 million in unrestricted aid this fiscal year to communities, about all the profits from around $4.5 billion in annual lottery sales.

A casino bill would authorize three resort casinos in different regions including one for Western Massachusetts and a separate slot operation that could be anywhere. The state House of Representatives approved a casino bill last month and the state Senate is set to resume debate on its bill on Tuesday.

The bill imposes a 25 percent tax on gaming revenues at casinos and 40 percent tax on sales at the slot parlor.

The Republican file photoMichael J. Widmer, president of the Massachusetts Taxpayers Foundation

The taxes could generate $100 million in annual local aid, but that would possibly be only enough to prevent a decrease in state aid that would result from declining sales at the Lottery, said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation. Despite numerous studies on the issue, no one knows for sure how much in lottery sales will be siphoned by casinos and slot machines, Widmer said.

Cities and towns will see “no bonanza” from the casinos and maybe “roughly a wash,” Widmer said, referring to a study on casino revenues by his organization.

“I don't think in reality there will be much in additional revenues for cities and towns,” Widmer said. “It’s not a significant infusion of new dollars.”

The taxpayers foundation is neither for nor against casinos.

The casino bill goes to great lengths to mitigate any possible losses to local aid, said Rep. Joseph F. Wagner, a Chicopee Democrat who is a co-chairman of a legislative committee that approved the legislation.

The bill itself says it is “imperative” to enhance the lottery and continue the state’s dedication to local aid.

“There is going to be a net gain in communities to local aid,” Wagner said.

“I would like more local aid, but the jobs are much needed right now,” said Chicopee Mayor Michael D. Bissonnette.

Communities that host casinos would also receive millions of new dollars from property taxes, as well as hotel and restaurant taxes, Bissonnette said.

Geoffrey C. Beckwith , executive director of the Massachusetts Municipal Association, said officials are “reasonably confident” that casino and slot tax revenues would be adequate to offset any decline in state aid from the Lottery. The bill provides a framework, but no detailed predictions on local aid, he said.

“There have been no definitive estimates of what revenues to communities will be,” Beckwith said.

Some critics question the logic of casinos if state aid to communities would remain virtually the same. West Springfield Mayor Edward J. Gibson said local aid from the lottery is critical to cities and towns because it comes with no restrictions and can be used to finance services such as police, fire and public works. “It shouldn't be just a wash,” Gibson said. “What’s the sense?”

The impact on the lottery is only one significant way that casinos would affect municipal governments. As they debate on the bill, legislators are also considering how much to tap from casino revenues to provide for host and surrounding communities to deal with traffic, crime and other possible effects of expanded gambling.

The bill also calls for referendums in communities where casinos would locate, but just the host ward would vote in cities with a population more than 125,000, those being Boston, Springfield and Worcester. A local senator, backed by the Springfield mayor, has submitted an amendment that would push the population threshold higher and require a city-wide vote in Springfield and only ward votes in Boston and Worcester.

The Republican file photoTreasurer Steven Grossman

Treasurer Steven Grossman said it’s speculative, but he believes three casino resorts and a slot parlor would generate a net increase in state aid to cities and towns.

“I'm a little more optimistic,” said Grossman, who oversees the lottery. “I think there will be some positive impact.”

Supporters of casinos have pointed to the Lottery’s recent slow growth in sales. Sales for the fiscal year that ended June 30 were $4.427 billion, up slightly from $4.423 billion the prior year.

Grossman said lottery sales jumped by 3.5 to 4 percent for the first quarter of the current fiscal year, based on the strength of instant scratch games.

According to Sen. Stephen M. Brewer, a Barre Democrat and chairman of the Senate Ways and Means Committee, three casinos and a slot parlor would generate about enough gross sales to provide in the vicinity of $400 million in new tax revenues each year for the state. The casino bill would send 25 percent to local aid, or about $100 million.

Wagner pointed out that the bill includes language that would use a certain amount of gaming tax revenues for local aid if local aid drops from a prior year, but doesn't guarantee to completely fill any gap. The bill also earmarks about $14 million for local aid from $280 million in licensing fees from the casinos and slot parlor, according to an analysis from Sen. Michael R. Knapik, a Westfield Republican.

A 2007 report by the taxpayers foundation examined lottery sales and profits and concluded that $144 million in gaming tax revenues would be needed to mitigate losses from the lottery. That report was based on Gov. Deval L. Patrick’s failed 2007 bill to approve three casino resorts.

The foundation’s report noted that different studies provide different estimates for sales losses from the Lottery once casinos are up and running. The Patrick administration estimated that casinos could cause lottery revenues to decline up to 4 percent during each of the first three to five years of operation. A 2006 study by a panel of the state House of Representatives estimated a potential lottery decline of 15 percent through the casinos’ first two years.

A study for the Massachusetts Senate last year, completed by the Innovation Group of Littleton, Colo., said that sales at lotteries in other states declined in the first full year of operation of new casinos but rebounded one to two years later.

The casino bill includes a labyrinth of ways to spend casino revenues, a maze of earmarks called “a shadow budget,” by Senate Minority Leader Bruce E. Tarr of Gloucester. After 25 percent of casino tax dollars is carved out for local aid, the rest of the money goes to about 10 different programs including tourism, transportation projects, debt reduction, mitigation for communities, local capital projects and a fund to treat problem gamblers.

All the money raised from the 40 percent tax on the slot parlor would go to local aid.

The license for the slot parlor would not cut sales to the lottery, and would produce “a net positive” for cities and towns, according to Grossman.

Rep. Angelo J. Puppolo, a Springfield Democrat and member of the House Ways and Means Committee, said legislators needed to balance competing interests in spreading around casino tax dollars. Because of fierce demands from various organizations and groups, legislators could not direct all the casino tax money to local aid, he said. “Everybody was nipping at us,” Puppolo said.

Rep. Todd M. Smola, a Palmer Republican, said “the $64,000 question” is how casinos would affect local aid. Legislators want casinos to increase local aid, but that is only “pie in the sky speculation” at this point, Smola said.